Is the Auto Loan Bubble Bursting? Delinquent Loans Jump 27% Year-Over-Year

Screen Shot 2014-12-05 at 12.29.58 PMI’ve covered the ever expanding subprime auto loan market on several occasions over the past couple of years, most recently in the post: Chinese Homebuilders Expand in America as U.S. Auto Loans Hit Record Levels. As they always do, it appears that the chickens are starting to come home to roost.

The New York Times reports the following:

An increasing number of borrowers are falling behind on their car payments, even as the total amount of outstanding debt reaches new heights, according to the latest report by Experian, the credit and research firm.

In a presentation on Wednesday, Experian said the balance of loans that were 60 days delinquent increased 27 percent, to roughly $4 billion, in the third quarter from the same period a year ago.

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The Debt Bubble Expands as Auto Loan Amounts Hit a New Record

Is anyone surprised that the poorest and least credit worthy of Americans are being saddled with piles of debt in order to buy new cars? It’s not enough that a generation of our citizens will toil pointlessly to pay off more than $1 trillion of student loans, we may as well add some other form of debt burden on top of it.

It’s hard to even imagine this is happening so shortly after the last credit bubble train wreck, but happening it is. Creative ways for people to purchase cars they can’t afford have been on my radar screen for some time now, and if you recall, I posted an article last April titled: Just Keep Dancing: Introducing the 97-Month Auto Loan.

Well the dancing has continued, and now we have Americans borrowing at all-time record levels to buy cars. USA! USA!

From CNBC:

A combination of higher prices for new cars and relatively low rates for auto loans means Americans are borrowing a record amount to pay for their new rides.

According to Experian Automotive, which tracks millions of auto loans written each quarter, the average amount borrowed by car buyers last quarter climbed above $27,000 for the first time ever.

According to Experian, the average auto loan in fourth quarter 2013 was $27,430—an increase of $739 compared with the same period of 2012. The average used car loan was $345 higher, coming in at $17,974.

Those with non-prime credit ratings—or credit scores between 620 and 679—had the highest average auto loan. For these borrowers, the average new car loan rose more than $1,500, to a new high of $29,385.

Not surprisingly, those with subprime credit ratings—credit scores between 550 and 619—had the highest average monthly payment, of $499.

Yep, no doubt this will turn out just peachy.

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